The ROI of Branding

You know when a brand is just killing it. Think of Under Armour, Salesforce.com or Zappos. Without a doubt they are masters at the art of branding.

Tony Hsieh, CEO of the online shoe retailer Zappos, renowned for its customer service, told a story about someone who called the Zappos customer support line inquiring about the location of the closest pizza shop. Rather than explaining to the person that Zappos doesn’t sell pizza, the phone representative searched on his computer and provided the caller with the name and number of a local pizza place.

I love hearing stories like this. It’s that type of customer commitment that makes a brand head and shoulders above the rest.

What is Branding?

David Ogilvy famously defined a brand as “The intangible sum of a product’s attributes: its name, packaging, and price, its history, its reputation, and the way it’s advertised.” More recently, Groundswell authors Charlene Li and Josh Bernoff stated, “Your brand is whatever your customers say it is…”.

In today’s hyper-transparent, real-time, social world, a brand is really all of the above – it’s both the packaging and essence of the brand, as well as the stories being told by your prospects and customers.

In a survey of more than 28,000 respondents, Nielsen found that 92% of consumers trust brand advocates above all other forms of advertising. According to a recent six-month study by Google, TNS and Ogilvy, consumers are more influenced by word of mouth in buying decisions than by print media, TV, movies and brand websites.

It’s with this in mind that you can appreciate the power of the brand. It’s not necessarily the advertising of the brand, but rather the entire brand experience that people remember. This can certainly be comprised of everything from the logo, tagline and color palette to the messaging, website, blog, videos, emails, events, purchase process, customer support, and any other brand touchpoints.

Your Brand As Religion

Martin Lindstrom, author of the books Buyology, Brand Sense and Brandwashed, conducted a study to explore the way a person’s brain responds to a brand vs. a religion. What he found was that people’s brain activity when viewing brand imagery such as from Apple and Harley-Davidson is highly similar to the brain activity when viewing religious imagery.

When done right, branding is something that can bring you and your audience together in a very powerful way.

Benefits of Branding

Build a strong brand, and it can help your business in substantial, tangible ways. With a strong brand, word of mouth increases, thereby increasing your reach and awareness. With a strong brand, your reputation is reinforced. With a strong brand, you can more easily attract the best employees, and you’ll naturally gain brand advocates. All of this accelerates the growth of your business.

Branding’s Impact on Pricing

One powerful consequence of all of these benefits is the impact that branding has on your pricing. With a strong brand, you can set higher price points, which generates greater profitability. The legendary investor Warren Buffet certainly knows this, and this is precisely why he’s a significant investor in five of the top 25 most valuable brands in the world. What Buffet knows is that the power of a brand is really the power to raise prices.

Proof of a brand’s ability to increase the price people are willing to pay for a product is provided by Significant Objects, an experiment by writers Rob Walker and Joshua Glenn. In the experiment they purchased thrift-store, garage sale and flea market objects, packaged them with a back story and then tested their purchase price on eBay. On average, the purchase price of the items was $1.25. After being branded and placed on eBay, the average resale price was a staggering $36.12.

For example, a cat napkin ring was bought for 50 cents and then sold for $31. A felt mouse in a chef’s hat was bought for 50 cents and sold for $62. A wooden mallet was bought for 33 cents and then sold for $71. If this doesn’t demonstrate the value of branding in a very tangible way, then I’m not sure what does.

Measuring the ROI of Branding

If you are looking for specific measurements by which to judge the effectiveness of your branding efforts, you have a variety of options at your fingertips:

Surveys: Where stats are not available, consider a survey of prospects in your market. Conduct the survey as a baseline measurement prior to your branding initiatives and again after a period of sustained branding efforts, and then compare the results.

Brand Preference: Measure your target audience’s awareness with purchase consideration. After all, awareness without purchase consideration is a weak metric. Add purchase consideration, and you’re heading in the right direction.

Customer Acquisition: In the case that you generate a great deal of repeat business, measure your customer acquisition rate as you increase your branding efforts, and then assess the incremental value to your business through Customer Lifetime Value calculations.

Summary

Whether you’re a branding tour de force like Under Armour, Salesforce.com or Zappos, or are going to be one in the future, the ROI of branding is clear for your business. Focus on making your brand the best it can be, and see your business truly come alive. You’ll develop deeper bonds with your customers while building a crazy strong and crazy profitable business!

Tom Shapiro is the CEO of Stratabeat. Tom's thoughts on marketing strategy, branding, web design, and neuromarketing have appeared in Chief Marketer, CMO.com, CNN, Forbes, HubSpot Blog, iMedia Connection, MarketingProfs, MediaPost, among others. Tom is the author of the book Rethink Your Marketing.